Inch by Inch, Chrysler Gets Closer to Profitability

Amid restructuring operations and downsizing its dealer pool, Chrysler LLC will return to profitability “within the not too distant future,” CEO Robert Nardelli tells journalists following his keynote speech kicking off the New York International Auto Show.

“We are, in our 2008 plan, continuing to move in the direction of returning to profitability,” he says, adding the Auburn Hills, MI, auto maker is “on plan for the first two months. That plan continues to drive the company to profitability. We are very pleased with the progress we've made.”

Nardelli declines to say the U.S. economy has fallen into recession, but he boasts Chrysler pegged a 2008 sales downturn to 15.5 million vehicles while the rest of the industry remained more optimistic.

“We face realities in the economy and in the auto industry,” he says, crediting Vice Chairman Tom LaSorda for the ability “to resize” Chrysler's manufacturing footprint.

“We went through some agonizing and tough decisions,” adds Nardelli.

“Anytime you downsize, you affect loyal, dedicated employees. But we did that taking a realistic look at what the industry and the economy might bring. We were quick to move in reducing some of our products in the portfolio.”

The Chrysler Pacifica, Crossfire and PT Cruiser convertible, as well as the Dodge Magnum, all have been discontinued, and plans call for the dealer network of 3,600 retail outlets to be trimmed.

“We think we've incorporated a thinking of conservatism for 2008,” Nardelli says. “We did not build in a second-half recovery.

“If it happens, we couldn't be happier to change the volume up and drive the leverage of the productivity up. If we were wrong and were not conservative enough, then we will be quick to adjust as we did toward the end of the fourth quarter.”

Should sales fall below 15 million units, as was forecast March 18 by J.D. Power & Associates, Chrysler will “adjust accordingly,” he says.

“But right now, we don't see the need to adjust based on what we have seen through the first couple months. We have a huge competitive advantage to be able to make these decisions more quickly, with more agility. I think we're leaner, faster to do so.”

However, if Chrysler needs to make further adjustments in manufacturing capacity, “I would submit to you we might have to adjust less than some of the other manufacturers,” Nardelli says, adding too much was made of Chrysler's recent announcement manufacturing operations will cease for two weeks in July.

“It was no more than a traditional auto manufacturer's shutdown,” he says. “We tried to be out front. We asked everyone to take the opportunity, if they could, to schedule their vacation while we were down.

“We thought it would be great to proactively get out and let our suppliers know, so they can plan preventative maintenance, shutdown, retooling, etc.”

He says the move was not intended “to mask a shutdown as a way to adjust production.”

Whatever comes, Nardelli says he is not worried. “I just look at the market the way it is. Worrying about things distracts you from doing things.”